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Top 10 You Should Claim From Your Tax as a Restaurant Owner in the UK

Sep 9, 2022 | Tax & Accounting

If you are a restaurant owner and you’re still not tracking down your expenses properly, then you might not be able to claim back some of your expenses! Read the entire blog to know more about the Top 10 expenses you should take note for your taxes.

Restaurant Owner Tax UK: Top 10 You Should Claim From Your Tax as a Restaurant Owner in the UK

As a restaurant owner, the sector is facing a “minefield” of issues, including rising food and energy prices, as well as an increase in National Insurance contributions, which begins in April in the U.K. Since July 2020, the tourism and hospitality sector’s VAT rate (the tax paid when buying goods and services) has decreased to facilitate recovery from the Covid epidemic.

However, even if uncertainty continues to grow, you can continue to claim some expenses back from HMRC. At Sterlinx Global, we provide actionable intelligence to help your restaurants thrive through these difficult times. 

Restaurants can claim back several expenses!

You may be dreading tax season as you struggle to keep your business running during this difficult period of health and economic crises. However, identifying deductions to reduce your business income can help you save money on taxes. Here are ten essential tax deductions—as well as a tax credit—that you may take advantage of to lower your tax burden.

restaurant owner
Top 10 You Should Claim From Your Tax as a Restaurant Owner in the UK 5

1. Rent cost

The amount of VAT charged on rental payments is determined by the property. Rental payments are liable to VAT if the landlord has ‘elected to tax’ for VAT purposes; otherwise, rental payments are VAT-free.

As a restaurant owner and your business is VAT-registered, your costs will not be affected by the landlord’s decision to tax or not. You can recover any VAT you pay, just like you can for other business expenses.

2. Salaries and wages

As a restaurant owner, employee salary and benefits account for a significant amount of your expenses. You can, fortunately, deduct:

  • Bonuses, commissions, sick pay, and vacation pay are all included in employee pay.
  • Employee perks such as health insurance and life insurance
  • Like unemployment, you pay employment taxes depending on employee work and tips. Taxes on Social Security and Medicare

3. Advertising and marketing

In 2022, you may have done a lot more advertising to generate sales, especially during and after the COVID-19 pandemic lockdowns. Restaurant owners may deduct those expenses, which include signage, social media advertising, and promotions that were done to boost sales for your company. You can also write off the expense of meals and entertainment at a local restaurant marketing event.

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Top 10 You Should Claim From Your Tax as a Restaurant Owner in the UK 6

4. Food cost (cost of goods sold)

Food supplies for restaurant owners are tax-deductible, and HMRC provided guidance for supplies that took place between 15 July 2020 and 31 March 2021. Note that this is not a supply in the course of catering if you provide food that your customers must prepare themselves before eating. This is true whether the food is delivered to your clients or picked up by them.

5. Vehicle cost: fuel cost (if resto has delivery service, please refer to HMRC’s simplified or actual cost for this)

You can depreciate the cost of an automobile you acquire for business (spread deductions out over time). In order to depreciate the car, you must utilize it for business more than 50% of the time and equally claim back VAT on fuel costs. 

6. Vehicle cost: repair and maintenance (if resto has delivery service)

When you drive for business, as a restaurant owner, can deduct up to 50% of your car maintenance expenditures. If the car is used 50 percent or more for business, it might be deducted 50 percent of the time.

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7. Admin expense

Administrative expenses can be deducted from business profits for tax purposes if they are incurred entirely and solely for the business.

8. Insurance

VAT is not charged on insurance transactions. VAT cannot normally be collected on goods and services purchased to make exempt supplies; for additional information, see paragraph 7.1. Some premiums earned under insurance contracts are subject to some impositions. 

It’s important not to mix up IPT and VAT; they’re two completely different taxes. For VAT reasons, the word ‘insurance transaction’ differs from the term ‘insurance contract’ for IPT purposes. IPT, unlike VAT, is not refundable. Notice IPT1: Insurance Premium Tax contains more information on IPT.

9. Laundry & cleaning (table napkins, table cloths, etc.)

You can deduct the cost of your work attire as well as maintenance charges like laundry and dry cleaning for table napkins and tablecloths. As a business owner, the outcome could have a significant impact.

10. Miscellaneous expense

Other expenses that you can deduct as miscellaneous are fees for appraisals. Losses due to accidents and theft

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Top 10 You Should Claim From Your Tax as a Restaurant Owner in the UK 8

Here is a list of recently asked questions about the Top 10 You Should Claim From Your Tax as a Restaurant Owner in the UK

  • How can I easily claim VAT for my expenses as a restaurant? 

    Your company bears the burden of proof for your deductions. You are not required to submit your business records with your tax payments, but you must be able to produce the documents to an auditor or inspector as proof of deductions. Maintain meticulous records for corporate travel, expenses, gifts, and depreciating assets. 

  • How does my location impact what VAT I can charge? 

    Should you make a provision for food and drink at a location where you supply, you are required to charge the standard rate of VAT or a temporarily-reduced rate. In this case, you should carefully review what the word “premise” signifies, as it may not always refer to where your firm is located. 

  • When do the temporary rates stop applying?

    You should charge the standard rate if you provide any catering service for consumption outside your premises. The HMRC notice about the “temporarily reduced rate” is restricted to supplies that were made between July 15, 2020, and March 31, 2021. These supplies do not equally include beverages.

Conclusion 

With so many regulations, limitations, and exceptions, tax season can be difficult for restaurant operators. While this article just covers the highlights, it should serve as a starting point for determining which deductions are available to help you save money on taxes. However, because deductions can be complicated, consult with a tax professional at Sterlinx Global before submitting your tax return to see which ones you could be eligible for.

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